Archives for April 2013

Arbitration Clause in Employee Handbook is Unenforceable

In a decision that may undermine the validity of a relatively common method used by employers to require the arbitration of employment disputes, a U.S. District Court judge recently decided that a company’s dispute resolution policy, which appeared only in its employee handbook, was not enforceable. The arbitration provision, the court ruled, was not part of a contractual bargain between employee and employer. As a result and despite strong support in case law for the enforcement of employment-related arbitration agreements, a  motion to compel arbitration was denied.

The case involved an employee’s claim that her employer interfered with her maternity leave rights under the Family and Medical Leave Act (FMLA). The employee alleged in a U.S. District Court lawsuit that she was passed over a promotion and demoted to a part-time position in retaliation for asserting her rights. Citing a provision in its employee handbook — for which the employee had signed a standard receipt and acknowledgement form, which commonly appears at the end of employment manuals — the employer moved to compel arbitration. The court denied the motion, citing the facts that the manual was not negotiated by the parties and the employer reserved a unilateral right to modify its policies.

The case, Domenichetti v. The Salter School, LLC, was decided April 19, 2013. While it points up the need for employers to take care when drafting arbitration clauses, it should not undermine their general enforceability. As long as the agreements are clear, reasonable and the product of a bargained-for agreement, they will generally be enforced in Massachusetts and may even be applied to alter normal procedural rules that may apply in employment cases. (See Feb. 29, 2012 Post on this site.) Arbitration agreements are viewed favorably by many employers, which see them as a faster, less exepensive, and less risky way to resolve disputes.

Wage Audits and Record Keeping Requirements

A mid-sized Framingham employer was faced with an audit of his business’s wage payments and record-keeping by the Massachusetts Attorney General’s wage and hour office. The inquiry began after an employee complained about his overtime pay. The employer came to us for help handling the audit and asked us to assess other potential wage issue exposure. On review of voluminous employee time sheets and wage payment records, we identified several legal issues that exposed the employer to potentially large damages for back wages to employees and penalties to the government. We explained record-keeping and wage payment requirements under Massachusetts law. We reviewed the employer’s policies, modified them as needed, and helped the employer create an employee handbook. This provided strong communication with employees and firm/necessary controls of employer policies.

Result:  The audit was successfully managed through cooperation with the Attorney General’s wage and hour office. Record-keeping, wage and other policies were implemented to assure future compliance with the law.

Wage and Hour Audits — The Government’s Power to Investigate

It can be a pretty intimidating event for a small business. There you are, working hard as always, focusing on running your company, which certainly involves payroll issues, when a young man or woman appears at your door to announce a wage and hour audit. You are told the government would like to review your time sheets and pay records and talk to some of your employees. You’re also informed, in a pleasant but firm manner, that the local wage and hour office is empowered by law with complete access to those records.

At this point, most small employers do two things. First, they try to recall wage rules and record-keeping requirements, wondering if they’ve complied with them all. Then they call their attorneys, or find an attorney who specializes in employment issues, to ask what to do next. Inevitably, they learn that the wage and hour officer is indeed empowered to review their books and records. What’s more, they learn, the government can use its findings to force them to pay wages allegedly underpaid in the past, impose fines for violations of any of a plethora of wage and hour laws, and force changes in the ways business is conducted. [Read more…]